In the crypto world, people often use one key number to judge how active and trusted a platform is. This number is called Total Value Locked. It shows how much crypto is kept inside apps at a given time.
It helps people see where users are placing their money and trust. When this number grows, it can mean more activity. When it falls, it may show users are pulling funds out.
This blog explains total value locked for beginners who want to understand what it means, why it matters, and how it is used. This guide is for learning only.
Here’s why it matters
- It shows how much trust users have
- It helps compare DeFi platforms
- It shows growth or decline over time
- It helps spot popular trends in DeFi
When it goes up, it often means more people are joining. When it goes down, people may be taking money out.
It is not the only thing to check, but it is one of the most common signals.
What is DeFi
Decentralized Finance, is a way to use money online without banks. People can lend, borrow, trade, and earn rewards by using apps on the blockchain. These apps work all day and are open to anyone with internet access.
How Does TVL Work in Simple Terms?
Let’s use an easy example.
- A lending app has investors
- One user adds $1,000 worth of crypto
- Another user adds $2,000
- A third user adds $500
The total value of that app is $3,500
That value stays fixed as long as users keep their money in the app. If users remove funds, fixed value goes down.
What Is Included in TVL?
Total value locked can include many types of crypto, such as
- Crypto used for lending
- Crypto used for borrowing support
- Crypto added to trading pools
- Crypto staked to earn rewards
- Stablecoins lock in DeFi apps
It counts the current value of these assets, not the price at the time they were added.
How Is Total value locked is Calculated?
It is calculated using live crypto prices.
The basic steps are:
- Check how much crypto is lock
- Find the current price of that crypto
- Multiply amount by price
- Add all values together
For example:
- 10 ETH lock
- ETH price = $2,000
- Value = $20,000
This process is done for every token in the platform. Then all values are added to get total value locked.
Because prices change often, it also changes often.
What Makes It Go Up or Down?
It changes for many reasons. Below are the main reasons, explained simply.
1. New Users Add Money
When more investors join Decentralized Finance and add funds, it goes up.
This usually happens when
- A platform becomes popular
- Rewards are attractive.
- The market feels positive.
More users = more locked value.
2. Users Take Money Out
When users remove their crypto, it goes down.
This can happen when
- people want to sell.
- Rewards decrease.
- Trust drops.
- Better options appear elsewhere
Even strong platforms can see its drop at times.
3. Crypto Prices Go Up or Down
It depends on prices.
If cryptocurrency prices rise
- Total value locked can go up
- Even if no new money is added
If crypto prices fall
- Total value locked can drop
- Even if people do nothing
This is why total value is not always a perfect signal.
4. Reward Rates Change
DeFi platforms often offer rewards.
- Higher rewards attract investors
- Lower rewards push people away
When rewards increase, it often grows.
When rewards fall, it may shrink.
TVL for One Platform vs DeFi TVL
It can be measured in two ways:
Platform TVL
This shows how much total value locked in one DeFi app.
It helps investors:
- Compare apps
- See which app is more trusted
Total DeFi TVL
This shows how much total value locked across all Decentralized Finance apps.
It helps users:
- See how big DeFi is
- Track growth of the full market
Both views are useful.
How Do People Use TVL?
It is used in many ways.
- For Learning- New users use it to understand which platforms are active and trusted.
- For Comparison- People compare it between platforms offering similar services.
- For Trend Tracking- Rising total value lock may show growth. Falling may show caution.
- For Risk Awareness- Very low value lock can mean low use or low trust.
It helps assess strength, but it should not be the only factor.
What TVL Does NOT Tell You
It is helpful, but it has limits.
It does NOT show:
- If a platform is safe
- If the code has bugs
- If rewards are real or lasting
- If a token price will rise
A platform can have high TVL and still face problems.
Always combine Value with:
- Project details
- Team transparency
- Security checks
- Clear rules
Is Higher Value Always Better?
Not always.
High TVL can mean
- Strong trust.
- High use
But it can also mean:
- Short-term reward chasing
- Big investors moving fast
Low is not always bad either. New projects start small. It should be viewed as one signal, not a final answer.
Simple Example to Remember TVL
Think of DeFi like a digital locker room
- Users put money in lockers
- TVL counts all money in all lockers
- More lockers filled = higher TVL
- Empty lockers = lower TVL
It’s that simple.
Final Thoughts
Total Value Locked is one of the easiest ways to understand DeFi activity.
It shows
- How much money is in DeFi.
- Where users place trust
- How the market changes over time
It is useful for learning, comparing, and tracking trends. But it should always be used with other information.
If you are new to DeFi, it is a good place to start. It helps you see the bigger picture in a clear way.
